What Is Owner Financing?
Selling a house with owner financing is not the most common way to close a deal but it may be a great option for when you are having a hard time selling a home or when the buyers are on a tight credit market and want to benefit from the best interest rates and loan terms on a property that you wouldn’t be able to buy in other circumstances. If you want to learn all about owner financing, the biggest problems that you may face, and the biggest benefits, keep reading and find out and see if this is a reasonable option for you.
Owner financing or seller financing is an uncommon method to finance a property where the seller finances the property for the buyer and takes the role of the lender. The buyer is going to borrow money from the seller and make monthly payments with specific interest rates and loan terms, similar to what the buyer will do if the loan were from the bank. The property can already have an existing mortgage and it won’t affect the owner financing. Usually, the title of the property will belong to the seller until the buyer repays the loan completely.
This type of financing option is recommended for when your house has already been sitting on the market for a long time and you want to sell it fast, it is also a popular option among real estate investors or when the buyer has poor credits or knows that due to a previous foreclosure or unemployment won’t be able to get approved for a loan, in that case, the buyer will most likely be the person to suggest the idea and it will up to you to run a credit check, verify the income, look up the payment history, check the outstanding debts, and evaluate if the buyer should get your loan approved.
Owner financing can be used on all kinds of properties including apartment complexes, multi-unit family homes, and single-family homes.
How Is The Process For Owner Financing
Once you require the buyer to complete a loan application and you have checked their references and decide that they will be suitable to purchase the home and repay the loan in full it is time to determine the terms and interest rates of the loan. It is up to both the seller and buyer to select the length of the loan which can be anywhere from 5 to 30 years. It is recommended that the seller requests a downpayment fro the buyer of at least 10% and set the interest rates which are typically higher than those of traditional loans. You can also set a ballon payment which is a one-time payment that is required at the end of the loan.
Benefits Of Owner Financing For Buyers
The process of qualification is less strict when you are opting for owner financing sale making it a great option for people who are able to get a mortgage approved. Your financing options are also more flexible you can choose interest-only and less-than-interest and you won’t have to pay processing fees or administration fees.
The seller can require you a flexible downpayment, there is no minimum required so you can genotiate the amount.
The process of buying an owner financing property are faster and easier than using a traditional mortgage, you don’t have to wait until the bank processes the financing and you don’t have to fill much paperwork.
Downsides Of Owner Financing For Buyers
The interests of a owner financing sale tend to be higher than those of a mortgage loan.
You still need approval from the seller and while the process may not be strict there is a small posibility that you may not qualified.
You may be subjected to a due-on-sale clause if the seller already has an existing mortgage on your property and the bank may demand the entire payment.
Benefits Of Owner Financing For Sellers
You can close the deal faster than what it would take you to sell the house through traditional financing so it is a great option if you are in a rush to sell your house.
You can get a higher interest rate and the montlhy payments can increase your cash flow.
You are still going to retain the title if the buyer isn’t able to meet the terms of the loan.
You have more potential to sell the house without having to perform major repairs or renovations.
Downsides Of Owner Fnancing For Sellers
There is a risk that the buyer stops making payments which would hold you accountable to the unpaid taxes and put your property at risk of foreclosure.
If you need to take back the property because the buyer wasn’t able to fulfill the payments you will have to face the repair and maintenance costs.
Sell Your House To Us
Selling your home for owner financing can be useful in certain conditions like when you are looking to buy a house and have a hard time getting approve for a loan, nevertheless the are major problems you can face on this type of financing and while there are things you can do to reduce the risk of problems if you don’t want to take any risk then you should contact us and sell us your property.
We are the best option for when you are looking to sell your house fast, we pay in cash immediately and don’t care if your house is in need of major repairs or renovations. We specialize in buying homes, fixing them and selling them again.